Reconciling Stability and Growth; Smart Pacts and Structural Reforms

This paper analyzes the decision of a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact. The model shows that a pact may harm structural reforms, sacrificing future growth for present stability. The welfare gains brought about by a pact depend on a trade-off between the reduction in the deficit bias and the induced reduction in the amount of structural reform. A pact becomes more attractive (“smarter”) if it takes into account the fiscal impact of structural reforms, in line with a recent proposal by the European Commission.

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Year of publication:	2003-09-01
Authors:	Beetsma, Roel M. W. J. ; Debrun, Xavier
Institutions:	International Monetary Fund (IMF)
Subject:	Economic growth \| unemployment \| employment \| employment protection \| fiscal policy \| fiscal rules \| excessive deficits \| fiscal discipline \| fiscal impact \| budget constraint \| fiscal restraints \| unemployment benefits \| budgetary impact \| fiscal policies \| excessive deficit procedure \| tax wedge \| budget position \| public spending \| fiscal expansion \| fiscal costs \| tax revenue \| unemployment insurance \| unemployment benefit \| job creation \| unemployment risk \| fiscal implications \| high unemployment \| fiscal imbalances \| public debt \| tax cut \| budget constraints \| budgetary position \| fiscal authorities \| unemployed \| composition of public spending \| tax reforms \| taxation \| tax cuts \| unemployment rates \| unemployment rate \| budget balance \| government budgets \| fiscal arrangement \| fiscal considerations \| fiscal revenues \| fiscal profligacy \| employment tax \| fiscal benefits \| cyclical fiscal policies \| employability \| employment protection legislation \| reduction in employment \| long-term unemployment \| employment creation \| beveridge curve \| fiscal measures \| fiscal decisions \| budgetary impacts \| fiscal deficits \| capital expenditure \| fiscal regime \| public finances \| short-term unemployment \| structural unemployment \| fiscal expansions \| structural fiscal \| public expenditure \| employment measure \| budgetary positions \| formal fiscal restraints \| budget deficit \| natural unemployment rate \| fiscal institutions \| employment outlook \| expansionary fiscal \| tax revenues \| unemployed individuals \| temporary unemployment \| fiscal consequences \| fiscal deficit \| fiscal stabilization \| increase in tax revenues \| fiscal balance \| fiscal rule \| job search \| fiscal adjustment \| government budget constraint \| government budget \| fiscal restraint \| tax reform \| budget requirements

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Extent:	application/pdf
Series:	IMF Working Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series IMF Working Papers Number 03/174 3 pages long
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005263795